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This is a brief comment on Roy Grieve contribution. I share the most of his contentions, so I do not have any disagreement. I want just to make a point about substitution. There is no doubt that substitution is possible in consumption; I am used to add here that it turns to be more and more likely as surplus increases: there is no way for very low income population to substitute between calories and shelter, as there is some kind of minimum level of both that must be met. Once higher levels of wealth are reached, substitution in consumption becames possible, and this is indeed a factor that adds uncertainty to the economic system. It is not the case, anyway, of some kind of “perfect knowldege” choice.

But things run different in the sphere of production, and not exactly due to the “unscrumbling” thing. Technical substitution means that (almost) infinite technical combinations are known and available; and I did not meet yet an engineer that has been able to show me such wide knowledge. Engineers tend to thInk in terms of fixed coefficients, with very few production recipes. They must be right; at least, they are quite closer to production processes than economists do.

It is interesting to recall here a very nice contribution by Axel Leijonhufvud. It is his “Capitalism and the Factory System”, (in R. N. Langlois (ed.), Economic as a Process: Essays in the New Institutional Economics, New York: Cambridge University Press, 1986). He argues that vertical division of labor creates complementarities, precluding substitution. This is a dominant trend.

I would therefore suggest to discuss the technical substitution issue more on engineering grounds, although economists are not very used to.

Re. the Bichler and Nitzan article, whilst what the authors describe as “liberal” economics – by which I take them to mean neo-classical economics – as typically operating by divorcing economics from politics, I’m very unsure that that is what characterizes Marxist analyses as they claim.

Bichler and Nitzan assert that they will analyze “capital as power”. I guess that If one took a Weberian approach to society and politics – cf eg. Michael Mann’s “The Sources of Social Power” – then the Weberian emphasis will be much more on power than the Marxian one.

Finally, their work would seem to be heavily influenced by the World-Systems Analysis of Immanuel Wallerstein. I would refer interested readers to Wallerstein’s work for further analysis along these lines.

Thank you Eric Reinert for such a clear and concise summary of the limitations of neoclassicism, its recent trail of destruction, and of the historical context, including more sensible alternatives that have been there all along. We might update, extend and debate the latter, but the neoclassical approach is a dead end.

I read with engrossing interest the hard-headed analysis of The Asymptotes of power by Shimshon Bichler and J. Natzan. and indeed their article untaps the whole seams of this much-neglected beautifully austere analytical style. Their signature has been put on many statistical facts that awaited plenty of diggings into and a comprehensive articulation. Thank you very much for that!
However, needless to say, the authors would have expected that many of their readers would ringfence the validitiy of their inferences with additonal assumptions (indeed, it is surprising for a strategic overview material of this kind that they neglected to defend their aasumptions more thoroughly).
The authors presumably take a view, in common with the neoclassicals, that the role of figures in economics (and generally, social sciences) is much the same as in physical sciences, i.e. the figures are taken to be the objective representations of underlying social processes, at least with the unidirectional correspondence. The idea that cooking the business figures (or,at least, the business of creating the methodology for such cooking) is a power process of its own evidently evaded the authors. Prof. Donald Gillies of King’s College (London) wrote once in these Post-autistic economics Series (a reference here should be to either of the two 2004-05 Guides based on the materials of the Post-autistic Review, as RWER used to be called): “There is a fundamental difference between physics and economics which could be put like this. The physical world appears on the surface to be qualitative, and yet underneath it obeys precise quantitative laws. This is why mathematics works in physics. Conversely economics appears to be mathematical on surface, but underneath it is really qualitative.» Thus, basing the treatment of capital power on figures relevant in and of themselves only calls for much more serious methodological invistigations (which I would like to have a link to, if the matter has already been touched upon by Bichler-Natzan duo). Evidently, repackaging the “qualitative element of the quantitative power” as just the “hype factor” –is not the best way forward.
Having regard to the above quoted wise observations of Prof. Gillies, it should be believed that underneath the corporate cooking of figures which found its way into the national accounts analyzed, lie certain institutional conventions (like the accrual accounting which accounts as profits the “things” that are (not?) yet to be) that are themselves devised (not in a neutral way, of course) by the more exalted of capital powers. In pacticular, the authors do a commendable job of rebasing their capital measurements to some constant-value dollars in a bid to add up more “objectivity” to the analysis. However, the accounting conventions have changed drastically from post-WWII to 2012 — there, in fact, was a sea-change from the historic cost accounting to a “fair” value regime, under which profits, especially unrealized, become a purely concoctional category, and very elastic at that to say that there are actually any hard-and-fast numerical limits to the capital power. It would be an interesting discussion to learn how these soft-changes in the meaning of capital and gains on it through history actually are (a) reflected/adjusted in the national accounts, (b) whether the resulting historical comparisons are then apples-to-apples at all?.
Therefore, a more enlightening analysis of the institutional/ideological powers (i.e. ultimate true Wiz-of-oz powers underlying capital) that endow the pure numerical figures of capital power with significance and meaning would be needed to enrich the validity of the authors’ research program (especially on the plane of accounting conventions and how they reflect themselves in the capital accounts).
Finally, a more sobering thought about the possibility of structural shifts and institutionally sui generis category of capital power that we analyse. We could have taken the related capital accounts (or enterprise accounts) of the time of XI five-year plan in USSR and could have (I just presume) delivered just about the same strain of analysis. Maybe the picture they would have painted would be the same or even more glowing (after all, there was a numerically the same notion of capital and capital investments even there and then (if we substitute balance sheet equities for the non-existent stock market capitalization) — though qualitatively different). But would it have alerted us to the deep structural disorders happening in the decaying USSR economy?
Though we are prone to aggregating things measured in money, but not all equities are “born the same” (commensurate strategically, despite their “equitable name”) — I am sure, a dollar in equities representing a controlling stake has a different capital power than a minority equity dollar (btw, this is a conventional understanding in business valuation practices). A dollar in FIRE sector equities has a different systemic power-excercising potential than an equity dollar invested in a subordinate (industrial) sector. A dollar in equties related to a controlling holding structure can have multiples of capital power compared to a dollar invested into a subsidiary holding entity. That makes some institutional sense or not? And so anyone here plumping for a framework of Soviet style
“coloured-money” “normatives of capital efficiency”?

I wonder if Keynes idea of uncertainty implied such a radical scepticism or nihilism. After all, he believed in the possibility of rational economic planning: “I expect to see the State, which is in a position to calculate the marginal efficiency of capital-goods on long views and on the basis of the general social advantage, taking an ever greater responsibility for directly organising investment; since it seems likely that the fluctuations in the market estimation of the marginal efficiency of different types of capital […] will be too great to be offset by any practicable changes in the rate of interest.” (General Theory, p. 164) It seems to me that the underlying idea for Keynes is that through changes in the social and political institutional arrangements and mechanisms (in particular those related to investment activity), uncertainty can be reduced to a large extent — i.e. it is possible for society to increase certainty around a representation of the socioeconomic system’s relevant relationships and objectives, and on how to influence them. “Keynesianism” in this sense would be less “fine tuning” and finding the values of policy variables to be chosen in order to attain full employment, and more of constructing the social institutions, rules and mechanisms that would result in the reduction of the volatility and uncertainty of the “casino economy.” This is in any case what I see as the basic message of the Nordic version of Keynesianism — namely the late Stockholm school (or the late Scandinavian model).

I always find it interesting when the mathematics of neoclassical economists, who are responsible for introducing mathematics into their subject to get rid of qualitative, subjectivism, is criticized by mathematiicians. Your article seems to say that the result has been that mathematized neoclassical economics is qualitative and subjective, just the oppositive of what was originally intended Does it also mean that we need to run history backwards and reintroduce “qualitative” economics iinto the discipline, like that of Thorstein Veblen. As an institutionalist he certainly had very perceptive things to say about the deterministic way institutions function in our society.

My compliments on the article, it is good and appropriate. But it may miss the target, which I think is good research, rather than improved peer review.

Peer review is meant to improve quality, but is not performed by quality experts. Furthermore, I do not belive that the review system has been designed or approved by quality experts.

It is therefore unfortunate – or a disaster – that peer review has a status like today. Some people – especially in articles – treat peer referenced articles like absolute knowledge. It is rare to see criticisms, or attempts at classification.

Management science where I operate has seen a development from US type mass production, to flexible Japanese production, to European type service management and now ethics, including governance. No article has been found that specifies its place in this scheme, most seem to assume US type mass production. Today this is hardly done, even in the US.

I.e. research needs not only a quality check, there should be a quality process, or quality system. Articles produced are not isolated, they are part of a paradigm, or a culture, and that information is needed to evaluate, and include in a larger pattern.

Axioms or assumptions are necessary to understand research. Christopher Sims criticised in 1980 assumptions in economic models. They got better, for a while. Some wrong assumptions helped to create the financial crisis, according to Benoit Mandelbrot (who wrote before the crisis, put pointed out what was wrong in the models).

At a higher level, philosophy should be specified. Many assume an atomic philosophy, like logical positivism. It should be specified. Alternatively a holistic philosophy is chosen, like synthesis/design (Herb Simon), chaos or systems theory.

An atomic view of the organisation is in my view to see a soccer team as a collection of individuals. No team exercises are needed, saving expenses. And in a match there will be a random structure.

This is a large topic, and important. Management science is almost stagnant (Gary Hamel), the same is economics, in a dynamic world. Please write to me if you are interested to discuss this further (I may not see your comments).

Bravo Erick for your piece on the mayhem of neo-classical economics. I made similar arguments in my book (Unfettered Globalization, Praeger, 1999). You went farther and provide specific examples. It is rather unfortunate in this instance for so many authors to focus on silly notions such as ” physics envy” or “mathematization” rather than de-fanging a faudrulent rethoric. Let us hope that with greater exposure such as yours, more people will finally realize that neo-classical economics is a bible for a religion called Capitalism..

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